Putting Medicaid in the Larger Budget Context: An In-Depth Look at Four States in FY 2016 and FY 2017


Economic and Budget Outlook

Economy and State Revenues

Maryland’s economy has shown signs of continued recovery from the Great Recession. The state’s Gross Domestic Product (GDP) in 2014 was $350.3 billion, ranking 15th in the United States. Finance, insurance, real estate, rental, and leasing was the largest industry in Maryland, followed by government; professional and business services; and educational services, healthcare, and social assistance.1 The state had an unemployment rate of 4.3 percent in July 2016, down from 5.1 percent in July 2015 and below the U.S. average of 4.9 percent.2 The state experienced revenue growth of 3.9 percent in FY 2016 and projects 2.7 percent growth in FY 2017. This includes a projected 5.2 percent increase in revenues from the individual income tax in FY 2017 as well as a 2.1 percent projected increase in corporate income tax and sales tax revenue.3

State Budget

Governor Larry Hogan’s budget proposal of $42.3 billion for FY 2017 focused strongly on assuring that the state’s economic recovery stayed on track. Maryland faced $5.1 billion in accumulated structural deficit when the Governor took office in 2015, and addressing this deficit has been a primary focus for the Hogan Administration.4

The FY 2017 budget proposal included a tax and fee relief plan that would reduce general fund revenues in FY 2017 by $23.2 million. The budget proposal also included a 7 percent increase in state support for Medicaid. Even with these changes, the Governor’s proposed budget projected a surplus of $449 million for FY 2017 and an ending Rainy Day Fund balance of $1.1 billion. The Governor’s priorities included education, addressing transportation infrastructure, and spurring continued economic development. The budget as enacted included state general funds to offset the reduction in federal matching rate (from 100 percent to 95 percent FMAP) for the Medicaid adult expansion population, and reflected a 5.9 percent projected growth in total Medicaid expenditures.5

Update on the Affordable Care Act

Maryland Medicaid covers almost 1.3 million residents, including 258,000 adults who gained coverage as a result of Maryland expanding Medicaid eligibility under the Affordable Care Act. Like other states, Maryland saw higher growth than expected in the newly eligible adult population and some corresponding reduction in the rate of enrollment for other population groups, suggesting that some individuals were able to enroll through the income-only based category rather than depend on more complex eligibility under the aged, blind or disabled or other categories. The state is still evaluating the cost and utilization profile for the expansion adult population, which initially had a lower cost experience than the state expected.

Maryland experienced a slowing of enrollment during FY 2015 and FY 2016 due to resumption of eligibility redeterminations which had been temporarily delayed. Growth in the expansion population rebounded later in the fiscal year, and the state projects an enrollment increase of 17 percent in FY 2017 for this eligibility group.

Maryland implemented several new service options or grant programs under the ACA that target home or community based services for individuals with chronic or disabling conditions. In FY 2014, the state introduced health homes to support integration of physical and behavioral health care services for an estimated 15,000 individuals with behavioral health needs who are at high risk of additional chronic conditions. Health home providers can be psychiatric rehabilitation programs, mobile treatment service providers, or opioid treatment programs.6

The state also adopted the Section 1915(k) Community First Choice (CFC) benefit in FY 2014 to provide personal assistance services, accessibility adaptations, transition services and other supports for Medicaid beneficiaries requiring an institutional level of care. CFC services are provided in an individual’s home, including in assisted living settings. In FY 2015, the state implemented a new Section 1915(i) HCBS state plan option for children with Serious Emotional Disturbances (SED). This state plan option was implemented to sustain and refine the services that Maryland had offered under the Residential Treatment Center Waiver (RTCW).7,8

In addition, Maryland received a Balancing Incentive Program (BIP) grant, which provided an enhanced 2 percent rate of federal matching funds for all HCBS expenditures through September 30, 2015 to support state efforts to achieve a target that at least 50 percent of LTSS funds be spent on HCBS. By the second quarter of Federal FY 2016, Maryland reported that 60.5 percent of the state’s LTSS were for HCBS, a significant increase over the pre-BIP rate of 36.8 percent reported in Federal FY 2009.9 Other elements of BIP required development of a functional assessment for use in the state’s Medicaid LTSS programs, adoption of conflict-free case management in LTSS, and a No Wrong Door approach to providing information and entry for state residents seeking LTSS.

Health System Reform in Maryland

For many years, Maryland has pursued health system reform for Medicaid and other health care payers through a combination of two large federal waiver strategies.  Both waiver programs are undergoing further reforms to support achievement of improved health outcomes and reduced rates of cost growth.

Section 1115 HealthChoice Waiver

Maryland Medicaid has operated HealthChoice, a statewide mandatory managed care program for Medicaid enrollees, since 1997 under a Section 1115 demonstration waiver.10 The HealthChoice program aims to provide patient-focused, coordinated care through medical homes. Over 80 percent of Maryland’s Medicaid beneficiaries are served through MCOs, including almost 97 percent of children and 94 percent of the expansion adult population. Enrollment in HealthChoice for physical health care services is mandatory for all children and non-Medicare eligible adults, including persons with intellectual and developmental disabilities, most adults with physical disabilities, most children with special health care needs and persons with a serious mental illness. (Note: Specialty mental health and substance use services are carved out of HealthChoice MCOs and managed by a single Administrative Services Organization. Long-term services and supports are provided in a fee-for-service arrangement outside the HealthChoice arrangement.)

In June 2016, Maryland filed a HealthChoice waiver renewal application with CMS (to cover January 2017-December 2019). Under a renewed waiver, Maryland is proposing a variety of system reforms designed to improve outcomes for covered individuals. These include but are not limited to:11

  • Residential treatment for adults with substance use disorders. As one part of a comprehensive approach to solving Maryland’s substance abuse epidemic, Maryland proposes to include coverage of residential treatment in facilities that would otherwise not qualify for Medicaid reimbursement under the federal financing exclusion for individuals in Institutions for Mental Disease.12
  • Presumptive eligibility for individuals with criminal justice involvement to better connect individuals to health coverage at release and bolster efforts to prevent recidivism.
  • Dental coverage for former foster youth up to age 26. Under current rules, EPSDT dental benefits end at age 21.

The renewal proposal also includes pilots to allow local entities to receive federal matching funds for care coordination and other services that address key social determinants of health. These include:

  • Limited housing support services for up to 300 Medicaid beneficiaries statewide who are at risk of becoming or are currently homeless.
  • Evidence-based home visiting for high-risk pregnant women and children.
CMMI Approved Maryland All-Payer Model

Maryland has operated an all-payer hospital payment system under its Health Services Cost Review Commission (HSCRC) since 1977, and is now the only all-payer hospital payment system in the country. This all-payer system has operated under a Medicare waiver, codified in Section 1814(b) of the Social Security Act, that exempted Maryland from the Medicare Inpatient Prospective Payment System and Outpatient Prospective Payment System and allowed Maryland to continue its state-developed approach to hospital reimbursement.13 In 2014, Maryland received a new waiver from the Center for Medicare and Medicaid Innovation (CMMI) that authorized the HSCRC to pursue more significant reforms to support state goals for health system improvement.14

Under the five-year waiver, Maryland is authorized to require every hospital payer, whether Medicare, Medicaid, a commercial payer, or an individual consumer, to pay the same charge for the same service. In addition, Maryland will shift all of its hospital revenue over the five-year performance period into global payment models. The state will limit all-payer per capita hospital growth, including inpatient and outpatient care, to 3.58 percent and the annual Medicare per capita hospital cost growth to a rate lower than the national annual per capita growth rate per year for 2015-2018. Hospitals have committed to achieving significant quality improvements across all populations, including reductions in the 30-day hospital readmissions rate and hospital acquired conditions rate. Hospitals will submit annual reports of various population health measures.15 Maryland is responsible for submitting a plan for the progression of the All-Payer Model to the Centers of Medicare and Medicaid Services (CMS) by January 2017.

The state implemented an All Payer Claims databased (APCD) that includes enrollment, provider and claims data for Maryland residents enrolled in private insurance, Medicare or Medicaid MCOs. The APCD is a decision support tool for various state health reform partners, including the HSCRC and the Maryland Insurance Administration.16 In addition, the State’s designated Health Information Exchange (HIE), CRISP (Chesapeake Regional Information System for our Patients) allows clinical information to move electronically among disparate health information systems. The goal of HIE is to deliver the right health information to the right place at the right time – providing safer, more timely, efficient, effective, equitable, patient-centered care.

State Innovation Model

Maryland received a CMMI Round Two State Innovation Model (SIM) grant that is supporting state development of a strategy to integrate care delivery for individuals who are dually-eligible for Medicare and Medicaid. The state is engaging stakeholders to design an approach that is aligned with the All-Payer Model, will reduce service fragmentation, and will improve outcomes for individuals with complex health conditions.17 In an effort to mitigate the financial misalignment between Medicare and Medicaid, the all-payer model progression plan due at the end of 2016 to CMMI will include an implementation plan and timeline for including the duals in the future total cost of care calculations.

Addressing the Opioid Abuse Crisis

Maryland has placed a high priority on addressing the public health emergency resulting from abuse of opioid prescription drugs and heroin. In response to a dramatic increase in the number of deaths from overdose, Governor Hogan created the Opioid and Heroin Emergency Task Force (Task Force) in 2015 to engage experts and the broader public in identifying strategies to fight the problem. Under the auspices of an Inter-Agency Coordinating Council, Maryland state agencies work together to promote prevention, treatment and recovery efforts to reduce opioid overdose deaths. Strategies include identifying patterns of overdose activity through timely review and analysis of data from the Office of the Chief Medical examiner, improving access to substance use disorder treatment and recovery services, providing clinical education and training for healthcare providers, and implementing a Prescription Drug Monitoring Program. Effective October 1, 2015, physicians, advanced practice nurses, dentists and other providers with prescribing authority can prescribe Naloxone to any patient considered at risk of experiencing an opioid overdose or who is in a position to assist an individual at risk of overdose. This provision includes protections from civil lawsuits for prescribers and pharmacists who prescribe or dispense in good faith and according to statutory requirements. In addition, the law enhanced the Maryland Overdose Response Program, which trains and certifies community members in opioid overdose response with Naloxone.18

Maryland has continued to experience significant increases in heroin and opioid-related abuse; between 2014 and 2015, heroin-related fatal overdoses rose 29 percent and deaths from Fentanyl rose 83 percent19, while deaths from misuse of prescription drugs increased 6 percent. The Governor’s FY 2017 budget proposed $4.8 million in new funding to implement recommendations of the Task Force, including initiatives to enhance quality of care and expand access to treatment and support services. The Governor signed the National Governors Association (NGA) Compact to Fight Opioid Addiction in July 2016, and Maryland received a grant award in August 2016 from the U.S. Department of Health and Human Services under the Strategic Prevention Framework Partnerships for Prescription Drugs program.

The Maryland Medicaid program has established a workgroup on opioid harm reduction that includes both state staff and medical and pharmacy staff leadership from the Medicaid MCOs. This workgroup is engaged in developing a consistent set of prior authorization and step therapy strategies and is working to adopt the prescribing guidelines issued by the Centers for Disease Control, and in some cases go beyond the CDC recommendations. The state intends to expand use of prior authorization requirements for use of Fentanyl and Methadone in FFS arrangements in FY 2017 and all Fentanyl products in MCOs in FY 2017 and to add PA requirements in FY 2018 for Methadone and all long-acting opioid-based treatments, in both fee-for-service and MCO arrangements. In addition, MCO Medicaid prescribers will be required to check the Prescription Drug Monitoring Program before prescribing opioids in FY 2018. The state is implementing enhanced education efforts in both FFS and MCO arrangements in FY 2017, sending letters to patients and providers when patients are receiving high dose or other high risk combinations of drugs.

Maryland Medicaid Policy Changes FY 2016 and FY 2017
Eligibility, Application and Renewal Policies
  • Participating in Connecting Criminal Justice with Health Care learning collaborative to identify best practices for Maryland. Does not suspend of terminate coverage, but restricts payments to inpatient hospital stays longer than 24 hours.
  • Requesting presumptive eligibility under Section 1115 waiver renewal (FY 2018).
Delivery System and Payment Reforms
  • Medicaid participation in All-Payer Claims database in FY 2016.
  • HealthChoice Section 1115 waiver renewal filed in June 2016 proposing new initiatives, including residential treatment for substance use disorder in facilities regardless of size; local pilots to provide limited housing related services for certain individuals who are homeless or at risk of homelessness; and local pilots to provide home visiting for high risk pregnant women. (While the waiver renewal has a proposed effective date of January 1,2017; many changes are proposed to be effective July 1, 2017.)
Provider Rates and Provider Fees/Taxes
  • Across the board rate increases, except for nursing facilities. (2016)
  • Rate increases for nursing facilities and hospitals; rate changes for MCOs: 5.9% in CY 2016 and 1% for CY 2017.
  • Provider tax rate for hospitals decreased in FY 2017.
Benefits and Pharmacy
  • Adding Applied Behavioral Analysis services for qualified children with Autism Spectrum Disorder. (FY 2016)
  • Proposing in Section 1115 waiver renewal to extend dental benefits to young adults aging out of the foster care system. (FY 2017)
  • Added Physician Assistants as a new provider type. (FY 2016)
  • The state intends to expand use of prior authorization requirements for use of Fentanyl and Methadone in FFS arrangements in FY 2017 and all Fentanyl products in MCOs in FY 2017.  The state is implementing enhanced education efforts in both FFS and MCO arrangements in FY 2017, sending letters to patients and providers when patients are receiving high dose or other high risk combinations of drugs.
Introduction Montana

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